BENEFITS OF OWNING YOUR OWN HOME

On an average, homes in the Grand Rapids area appreciate around 4-5% per year. This will vary from neighborhood to neighborhood. For example if you purchase a $100,000 home with a 3 % down payment, your investment of $3,000 would give you a $4,000 to $5,000 gain in the first year. Along with this you will be paying interest on your mortgage and property taxes which are both income tax deductible. So the government is essentially subsidizing your home purchase. Your rate of return when buying a home is higher than any other investment you will make.

When you are renting a place to live, you can expect to receive regular rent increases. But when you buy a home of your own, the monthly payments will be the same for as long as you own the property. Many people have trouble saving money on a regular basis. The home that you purchase is an automatic savings account. Every month a portion of your payment goes towards the principle. Over time the principle part of your payment accelerates.

When you rent, you are normally limited to what you can do to improve your housing. You have to get permission to make certain improvements. It doesn’t make sense to spend a lot of money on paint, carpet, tile and window treatments when the person who benefits is the landlord and not you. Since your landlord wants to keep his or her expenses to a minimum, he or she will not be spending much to improve the place either.

When you own your own home, you can do what you want with it. You get the benefits of any improvements you make, plus you get to live in an environment you have created that you can call your own.

THINGS TO AVOID BEFORE YOU PURCHASE

The mortgage underwriter, (the person who approves your loan), may require a complete paper trail of where your money is coming from for down payment and closing costs. Moving your money around in different accounts could make it difficult for the lender to properly document the sources of your funds. I recommend you leave your money where it is until you get your mortgage is approved.

Don’t change jobs just prior to buying a home. Unless you make a move to a company and job in the same line of work you are presently in, you may be required to have a lengthy track record of employment. Above all, don’t seek self-employment until you buy and close on your new home.

Do not make any major purchases that would require debt. This includes furniture, appliances, electronic equipment, jewelry, vacations, automobile, and credit card purchases. When determining your ability to qualify for a mortgage, a lender looks at what is called your “debt-to-income” ratio. A debt-to-income ratio is the percentage of your gross monthly income (before taxes) that you spend on debt. This will include your monthly housing costs, including principal, interest, taxes, insurance, and homeowners association fees, if any. It will also include your monthly consumer debt, including credit cards, student loans, and installment debt.

SELLERS DISCLOSURE STATEMENT

By law the sellers of a property must give a potential buyer a disclosure of any and all problems with the property and the equipment on it. The seller must state as to whether or not everything is working properly. This must be in writing and signed by the seller. You also should order inspections of the various aspects of the property to determine that everything is in working order.

HOW MARKET CONDITIONS AFFECT PRICE

A hot-market is a “sellers market”. During a seller's market, properties can sell within a few days after being listed and there are often multiple offers. Sometimes homes even sell above the listed price. Though most buyers want to get a “deal” on a home, reducing your offer by even a few thousand dollars could mean that someone else will get the home you desire.

A slow market is a “buyers market” During a buyer's market, properties may languish on the market for some time and offers may be far and few between. Prices may even decline temporarily. Such a market would allow you to be more flexible in offering a lower price for the property. Even if your offer is too low, the seller is likely to make some sort of counter-offer and you can begin negotiations in earnest.

More often than not, the market is ssimply “steady” or in transition. When a market is steady, no real rules apply on whether you should make an offer on the high end of your range or the low end. You could find yourself in a situation with multiple offers on your desired home or where no one has made an offer in weeks.

THE WRITTEN OFFER

The offer you write on a property, in addition to what you are agreeing to pay for the property will also include items such as who will pay closing costs, whether any personal property is included in the sale, any repairs to be made by the seller, possession date after the closing, and the list goes on and on.

In addition to the written offer, you will be required to submit an earnest money deposit, somewhere around 1% of the purchase price will suffice.

Possession of the property is negotiated with the offer. If the seller has already moved, possession could be at closing. Usually the seller will ask for up to 30 days after closing. For any days they stay after closing they should pay you a per day rental figure equal to the daily cost of your mortgage payment.

The inspections are the buyer’s responsibility. You should apply for electric, plumbing, heating and structural inspections. You should also apply for a guaranteed termite inspection which means that the inspector guarantees your property for the next year and if any live infestation is found, it will be treated for no extra charge.

You will be furnished a copy of title insurance that insures that you have clear title to the property with no prior liens. The title company will also conduct the closing of the purchase. They are a neutral third party to see that both the buyers and sellers interests are protected and taken care of.